TO WHAT EXTENT CAN THE PHYSIOECONOMICAL FACTORS BE QUANTITATIVELY MEASURED TO PROVE THEIR INFLUENCE ON THE MECHANICAL RESULTS OF THE AYAL...

domenica 29 marzo 2015

TO WHAT
EXTENT CAN THE PHYSIOECONOMICAL FACTORS BE QUANTITATIVELY MEASURED TO PROVE
THEIR INFLUENCE ON THE MECHANICAL RESULTS OF THE AYAL & ZIF’S MATRIX?

LUCA SCAINI,
PH.D.

Undergraduate
Manager at IFA Paris, Shanghai HQ

Research
professor of Fashion Marketing and Lecturer of Working Methodology

ABSTRACT

The aim of
this paper is to improve the Matrix of Ayal & Zif (Ayal & Zif 1979),
with specific emphasis on the use of holistic variables able to offer a
quantitative background for analyses and incorporating the possibility to
explore the effect of physioeconomical hidden barriers on the mechanical
functions of this Matrix. The expected finding is a way to draw a new
quantitative Matrix for a business development strategy. The qualitative
methodology pursued lies in observation-and-analysis of a range of
physioeconomical data and econometric phenomena, while the quantitative aspect
of research lies in the computing of the economic effect of certain factors and
it is pursued thanks to a double meter: the Value meter (seen like a
relationship between Volume of Sales and Operational Economical Value) and the
Use of Resources during and in respect of the operational Time and in witch exact
stage of the operation. The hypothesized relationships between the two complex variables
are tested using data from a few different operations in order to offer a
sample of the working process and can be further improved and exported on a
larger scale, as a future improvement and actual limitation. Moreover, the
possible audience is both academicals, since the development starts from a
theoretical observation: “To what extent can the physioeconomical factors be
quantitatively measured to prove their influence on the mechanical results of
the Ayal & Zif’s Matrix?”, but also
a business audience since the practical application of the Matrix has been widely
used to setup markets development strategies of concentration or differentiation
by the industry and its enhancement can offer more realist results.

2. The physioeconomical structure
in industry’s commercial development: state of the art

p.3

3. The Matrix of Ayal & Zif as qualitative tool of
analysis, prevision and setup for concentration or diversification strategies;
potential predictability use

p.4

4. Hypothesis: The innovative
intervention on the mechanics and the introduction of complex variables may
lead to major improvements and alternative results through the discover of
the third curve and the proof of its existence

p.6

5. Qualitative and Quantitative
Experimentation

5.1 Convex or Bankrupcy Curve:
Demonstration

5.2 The Innovative Use of Complex
Value Variables on the Y Ax through the Physioeconomical Effect of Social and
Tribal Instances: Demonstration of an Alternative Strategy

5.3 Inversion of the Curves under
Complex Variables Analysis: Demonstration

p.9

p.10

p.11

p.13

Conclusions

6. Conclusions, Limitations and
Future Improvements

p.15

References

7. Bibliography, Webliography and
Index of Figures

p.16

1.INTRODUCTION & METHODOLOGY
OF WORK: RESEARCH AND SOURCES

The present paper discusses about the
use of the Ayal & Zif Matrix or matrix in order to explore the possibility to
set it up like a tool of quantitative analysis of the forces influencing and conditioning
business performances. The Matrix became popular among industry since its early
development thanks to the possibility to understand the two main possibilities
offered to a strategy in market penetration: concentration or differentiation
of a business in one or several markets. Now, the hypothesis of the present
paper is to explore the qualitative possibility of observation of physioeconomical
factors influencing the use of resources on a certain stage of a business and
the possibility to use complex variables to compute quantitatively them in accord
to a Volume or a Value as result of the operation. The paper firstly presents an
overlook on the Matrix and then introduces the methodology used and the hypothetical
innovation statement, focalizing finally on the effect on the mechanical
results by crossing the complex variables related to value with budgeted or
needed resources in respect of time progression. The paper introduces a
conclusive possibility to see how mechanical curves and their linked strategic
decisions maybe be unbinds by classical theories of markets development,
offering a different view and it also states a new possible curve to the whole
contest as potential result of the data’s analysis. It closes with the actual
limitations and possible improvements in the quantitative analysis.

The
research methodology adopted is based both on qualitative and quantitative data
and primary and secondary sources: the qualitative analysis is based on questionnaires
and interviews, the quantitative analysis is based on a wide data gathering
from different enterprises and of competence of three years, the sources and
informations used are going to be primary and secondary. The primary sources
used are going to be:

·Interviews, a total of 10,
in regard of 3 cases and 5 companies;

·Questionnaires, a total of
210 valid, out of 300 gathered;

·Data gathered from the
companies and market analysis

The
observation of the phenomenal effect of physioeconomics, the analysis of their
effect and the possible set up of a counterstrategy or the strategic
re-analysis were leaded by the use of primary sources, while secondary sources
were used for the Bibliographic and Webliography research, for the data
gathering and for part of the quantitative research. The preliminary and basic secondary sources’ authors and scholars
used are going to be Philip Kotler, Philip Parker, Robert Foegel and Ayal &
Zif. The reason for this choice is due to the necessity to investigate the effect
of unstudied or unmentioned phenomena of the businesses and to understand how
to calculate their effect quantitatively. Primary sources, here, offer the
possibilities to businesses to understand, analyze and finally overcome the
market resistance, seen like a hidden paraeconomical barrier, and analyze how each
aspect of the related society can influence the success. The primary sources
are going to be used to find those aspects and be able to understand how a
business can use them to create an innovative and even unconventional strategy.
That information is important to see to what extent cultural and
anthropological aspects, as well as physical, can be used in overcoming
barriers in a new market. The secondary sources are going to be both direct and
indirect. These types of sources are going to be used to understand what are
the main aspect that are ignored or in a market. Thanks to the study of the
different elements of phenomena acting on a market, it is possible to show and
determine if the use of them can be used to plan a better strategy.

2.THE PHYSIOECONOMICAL STRUCTURE IN INDUSTRY’S
COMMERCIAL DEVELOPMENT: STATE OF THE ART

Analyzing
the relevant factors influencing export operations and penetration on foreign
markets it seems like that the classical investigation dismissed the study and
the weight of the physioeconomical effects. Those effects were variously
studied by scholars, from the conventional or unconventional schools (see a
brief on Physioeconomical Theories and Development: Scaini, 2011, 2012, 2013). Physioeconomical
aspects are related to the links between industry and market, seen like a
complex environment. In fact, the society in its anthropological and cultural elements
influences both business performances and economics of a certain environment
(Badot, Bucci, Cova 1993; Bucci 2006; Venkatesh & Penaloza 2006). All those
aspect could be defined “paraeconomics” to enlighten the typology of influence
that they have on the economical society and business, even without considering
the physical ones, but only the cultural ones. Those aspects are:

Physioeconomics
may influence the success of a business and actively influence the sales
function, moving the balance of the enterprise’s strategic asset toward more
prudent approaches to market, or toward more courageous. For such reasons, they
must be taken in good and constant consideration by market strategists and they
are fully entitled of empirical and practical observation, basically being
influencer of micro environment (Kotler, 201214; Collesei, 2000;
Vescovi, 2008). From the other hand, in a multinational and global environment in
which most of physical barriers tent to fall (Hennessey, 2004: Valdani e
Bertoli, 2006), they are replaced by hidden cultural ones, so that they can:

·be even replaced by some
other physical barrier that can influence the institutional changing of markets
(Fogel, 1993),

·Influence the economical
behavior of single players that acting like rational actors may bypass basic
rules of cognitive rationality and act in an irrational but predictable way
(Ariely, 2008).

To
what extent such barriers may have influenced the business and the economic
development of entire nations was object of qualitative speculation since 18th
century and lately the quantitative observations (Parker 1997, 2000; Foegel 1964,
1994) proofed the influence of some factor like climatic ones, religious and anthropological.
The finding, even though without touching in depth the consistency of such
barriers, can be inscribed in the well-known mathematical Matrix based on
Cartesian axes, known as Matrix of Ayal & Zif, suggesting an analytical
system of choice of business develop for industry. International marketing
strategies should never bends themselves to some outdated–and senseless- retail
marketing concept like “retail pops-up where it’s cool” (Crisci 2014) just
because it is unpredictable or risky to prevent and study the behavior analysis
of market’s actors. Strategy must bypass itself and its traditional normative
limits to enter tactically into the research of fundamental components of
anthropology of the retail system (Scaini 2011, 2013; one very interesting hint
even though not strictly related to this topic in Kotler, Jain & Maessincee
2002; Venkatesh & Penaloza 2006). All marketing operations (from
penetration to retail) are actually influenced by physioeconomics, whom, even latent,
can influence the marketing strategies in a different measure and upon atypical
ways. Those intervene and influence the product (Pellicelli, 20107),
the distribution, the PoP (and its visual merchandising choices), the
communication and advertising. Due to this, mathematical well known and
effective tools of analysis must be used and adapted to enhance their strict objective
efficiency (Thompson, 2001; Johnson & Scholes, 19976), since it
was eroded by paraeconomical factors, barely analyzed and hardly searchable
under quantitative perspective. All of mentioned physioeconomics, from witch
this paper takes its reasons and that apparently may look like barely
economical, reflect themselves in a powerful way on tactics adopted by
enterprises, up to the point to mark the line splitting success and failure in
the market strategies (Scaini 2013) and splitting reactions from the markets when
stimulated externally, stimulation that can be economical or monetary. For all
those reasons, it is useful to act on this Matrix, merging it with physioeconomics
and introducing some innovation.

3.THE MATRIX OF AYAL & ZIF AS A TOOL OF ANALYSIS,
PREVISION AND SETUP FOR CONCENTRATION OR DIVERSIFICATION STRATEGIES: POTENTIAL
PREDITCABILITY USE

One
among many useful tools for qualitative analysis of diversification/concentration
strategies for an enterprise aiming to enter new markets is the Ayal & Zif Matrix
(Ayal & Zif 1979; Scott 1986). This tool is good to analyze some penetrative
performance and to define which is the market structure is found and,
consequentially, which is the right strategy to perform, then. The sales
function of this Matrix derives from two Cartesian axes and it takes form of
curves showing the typology of penetrative actions (this function, acting
together with a number of other factors and criteria of analysis, may show the
potential development of a certain action on a market and suggest the best future
corporate strategy).

Observation
is pursued evaluating the total amount of resources used in a certain operation
in respect of the obtained result and it offers two possibilities:

·V≥NR causes a penetration curve (“Concave”),

·V≤NR causes a resistance curve (“S”).

In such
situation, it is commonly stated that NR = Budgeted or Needed Resources and V =
Volume of Sales.

In the
traditional Matrix, in case of strong resistance from the side of market, and
consequential low operative profitability, it is found an “S” curve. In case of
weak resistance and strong operative turnover it is found a “C” or concave
curve. At its starting stage (Pellicelli, 20107; Scott, 1986) this Matrix
was presented and introduced into the business like a tool of definition and
choice between strategies of concentration or differentiation, and it was
lightly intended like a predictive tool. In fact, if used for quantitative
observation, it can’t predict, and it could only if used for qualitative
observation. Indeed, one among the main reasons why this Matrix should be
further investigated lies in the fact that it could be easily adapted to show other
possible reactions and could be a hint for further numerical and quantitative analyses
aiming to understand of the origin of the function created on the Cartesian
plan and the hidden forces in action. This represents a point of continuity and
develop with the actual state of the research. “To what extent both actual parameters can be considered exhaustive for
the expected result, and to what extent they can be can be improved to make a
quantitative Matrix that can take into the count also physioeconomics entering
into the dynamic reactions between company and markets?” The question is
not tautological, neither self-limited, since the degeneration of the original
basic Matrix passed through the mathematical incapability to understand how
much the unconsidered causes may have influenced the expansion policies, making
it just a sampling Matrix for potential strategies. This paper wants to offer
the possibility to setup one functional Matrix of sales based on complex
parameters and set up on dynamic analyses (based on the temporal development)
that can enhance both: the quantitative analysis and the qualitative
predictability and consequentially generate different curves able to improve
and enhance the corporate strategic setting. The following figure shows the
original Matrix with the classic situations:

Figure 1: Matrix of Ayal & Zif

Following
the figure, upon a certain “high” use of resources (defined by “some” form of
resistance on the market) the result is a low-and-slow growth of the sales:
despite in case of a low resistance the result is a high-and-fast growth of the
volume of the sales, in both case till to a certain moment-and-level of
saturation of the market, determined by several factors, such as competitors,
lead time, cycle of life). In the original
Matrix it is assumed that both function may reach the same value-point and the
same resistance but in different moments. The observation of the Matrix, together
with some other parameter leads to the definition of the strategy:
concentration or differentiation on the international markets. As an answer to
one of the two initial questions, “To
what extent the Ayal & Zif Matrix keep in count of the physioeconomics
making a quantitative Matrix?” it is necessary to search two specific
aspects concerning the mechanics of this Matrix, for which it is assumed that:

·The introduction of the concept that of “research of the
causes” influencing the curves in adopting the one or the other aspect and the
measurement of the physioeconomical interferences in quantitative way.

4.HYPOTHESIS: THE INNOVATIVE INTERVENTION ON THE
MECHANICS AND THE INTRODUCTION OF COMPLEX VARIABLES MAY LEAD TO MAJOR
IMPROVEMENTS AND ALTERNATIVE RESULTS THROUGH THE DISCOVER OF THE THIRD CURVE
AND THE PROOF OF ITS EXISTENCE

Matrix’s
mechanic must be revisited under an econometric spotlight, linking both axes
with measurable values.

·On the “X”, where it is placed the value referred to
“budgeted or needed resources” the value itself can be enhanced transforming it
in a complex and dynamic parameter such as “X=budgeted or needed
resource/time”, where the need of resources is strictly related to scheduled
and planned stages of the operation and linked to the right moment in a budget
allocation, in respect of its environmental condition.

The
suggested strict relation with time is not new at all, and mostly implied, but
even though used and considered, it is:

·still underestimated

·used retrospectively and not useful to predict a
future possible scenario

·linked mechanically and not realistically to the
second “Y” ax

In fact, the
use of resources is not always constant even though it must be always, at least
generally, planned as suggested by a few scholars in mathematical way and as a
mean of quantitative measurement, and mostly can be referred to Kutschner &
Schmid (2010). Anyway, linking this complex parameter to the “Y” ax’s value
makes possible to investigate and understand the strength and the typology of
resistance, if economical or physioeconomical, and state their action range of
time. Moreover, the full relative parameter on X (X=NR/t) implies a non-regular
and non-constant curve curse, and it is a new finding. The curve can be very
irregularly abnormal, or alternative un-linked to strategies and modifying the
final approach to them.

In this case
we could say that t = (R* x frmx LT), where t is the time concept adopted equal to the average budgeted
resources (R*) multiplied per the
fraction of investment in that unit of time (frm) – for example month- multiplied per length of time unit (LT)

The
advantage of applying some temporal dynamisms and average length of the single
periods to the Matrix applied to values, is that it allows to prove an
evolution of the function during the time that is much more irregular than
linear, but more reliable and realistic and to show how hidden forces are
constant. Moreover, it produces the possibility to have different curves, in
fact, some use of resources is strongly localized on a certain stage of time,
like spot-operations, influencing in anomalous way the curve and creating
inconstant curves. Present paper is intended to prove the existence of new and
abnormal or inconstant curves: some can generally relies to the main well-known
two, some can’t, accordingly to the following example.

Figure 2: Possible Curves in the Matrix
of Ayal & Zif

It is
hypothesized that the commercial or economical resistance can be more regular
and predictable than a physioeconomical one and can be managed in a more
predictable way, being independent from unexplored, unexpected environmental
factors. In fact, the research shows how irregular a curve results when it is
set dynamically linked to physioeconomics and how instead some market related
issues (fairs, trading season, and competitors’ counteractions) can be set up
in advance. Although, it is quite normal or simpler the allocation of needed
resources in a constant way, even though following Thompson (2001), sometimes
it is needed not just to manage the right operation, but in the correct way,
and it is the case of physioeconomics in action. All this, in order to make the
operations both efficient and effective. Under this new light, the
physioeconomical resistance as well as every paraeconomical hidden force in
action, could result strong not just due to a low use of resources, but due to
a misuse of the evolution dynamisms of the operation, lack of prediction and
deep investigation.

·On the “Y” ax, where it is traditionally placed the
economic value, such variable must be adapted to the pertinence of the
circumstance. Actually, in this paper, it is supposed that it is possible to
refer both to the function of sales (volume of sales) or the function of value
(value of sales). For an instance, for those products with a high added value
such as luxury goods, technology at the initial stage of cycle of life. This is
the variable that is functional to the company’s strategy and that can be
easier to recognize and manipulate depending on needs and that can be
representative of turnover, net or gross profitability, the Value/Volume ratio
(Val/Vol).

Accordingly
to the present paper, to face a strong resistance and of an origin that is not
strictly economical or financial (like the resistance on price), but of a
cultural or physioeconomical origin, it is advisable to invert the way how the
“Y” ax of the Matrix is used, focalizing on unitary value, better than on
volume of sales and its consequent turnover. In practice, it is better to work
on limited quantities but with a unitary high added value, or not selling
“more” (it something stimulating the physioeconomical resistance), but selling
“at more”, or not just selling but earning (Andreani & Rossi 2007). The
add-on of complex parameters can influence the whole structure generating
functional Matrixes (or curves) that, in the general overlook, are close to the
ones already known, but instead in the single stages or in the micro periods
can result altered. Some curve (as shown in the example under Figure 3, below),
could show:

·abnormal development,

·different or even opposite if considering volume or
value,

·altered course if resources are linked with time.

The
importance of the complex variables lies right in their ability to allow a
deeper vision of the strategic development, linked to a typology of curve, so
that reading the curve under a different light, strategy itself will result
influenced. The main interesting innovation linked to the analysis of
physioeconomical resistance research is connected to the presence of a third
specific potential curve: it is a “convex” one, representing the operational “bankruptcy”.
For an instance, in the case witch the utilization of resources is pursued in a
wrong way (without any correct evaluation of the physioeconomics in action,
whom are hidden and of a difficult investigation), the risk is to incur in this
third condition, otherwise of a difficult spot. Such circumstantial curve
should not be just spotted, but expected and calculated numerically.

Figure 3: Matrix of Ayal & Ziff
with modified mechanic and third curve

The change
introduced in the single variables, seen as first improvement to introduce the
qualitative analysis into the quantitative one, and limited to the general
mechanical structure, leaded to a new curve, defined like “Convex Curve or
Bankruptcy”.

This curve
derives its failure aspect from:

·A slow or too late success under a Value and/or Volume
analysis (for an instance, late up pricing caused by a too low penetration
price or by a too slow penetration; or because of a too small volume of sale,
despite of its value). In this case the complex variable “Y” allows a double
interpretation, based alternatively on the volume and value of profitability of
sales;

·Some too heavy use of resources. This could be based
on a wrong promotion focalized on price (for an instance, promotion on the
single unit price), or it could be for a long-lasting stage (period of time),
so that it obstacles the correct positioning. It could also happen due to a
wrong evaluation of the promotional mix (for an instance based on price better
then on other promotional means like communication or ignoring that the product
itself is linked to specific physioeconomics, Scaini 2013).

This is an
“operational failure curve” because the operation itself could require more
resources than budgeted and more than ones generated by product/market. The
very first reason why such curve is hardly spotted is due to the management of
budget in respect of time, whatever it is to sustain the operation of
penetration or to cover the need to furnish of resources to the company. For
this reason it is necessary to set up the “X” variable with a strict link with
time. In this case, it is necessary a deeper analysis. A predictive analysis
could be started only after an evaluation off-line of all possible results,
evaluated in the respect of the market acceptance in accordance with time. Such
response should not be evaluated in terms of mere mechanical “economical
reaction to a marketing tactic”, but in the respect of physioeconomical
barriers potentially in action on the market. To do that it is needed an
observation-analysis-action based system, in order to setup some counter-tactic
adequate to the possible market’s responses with budget allocations not just
correct, but exact as per time stage.

5.QUALITATIVE AND QUANTITATIVE
EXPERIMENTATION

A
qualitative observation was pursued by the means of questionnaires and
interviews to understand the opinion of market actors about the events occurred
and occurring in the target market. Suggestion of present paper is to use this
kind of observation to recon and predict potential issues. The use of
marketing’s proper and improper tools, such as market researches, focus groups,
Likert scale, questionnaires and interviews may open to analysts certain hints
on incoming events. Even though those tools are not objective, neither
quantifiable and consequently hardly useful to allocate a budget and to predict
the results, they allow anyway to predict if and how the market will require a
concentration strategy or will warrant with an immediate financial revenue and
a low budget, to put into practice similar operations in other market following
a differentiation strategy, as proofed in the present paper, in fact , among
the others, this paper states the innovative idea that one of the main problem
lies in the observation of the possible physioeconomics in action linked to the
operation.

A
quantitative observation was pursued using primary data gathered from a number
of companies, crossed with some secondary data observed in the target market
(Russian Federation and Ukraine, in present case) and recollected into three
main examples. This observation observe data of operations already pursued or
still in process in form of simulation and it is another actual limitation for
future improvements. The following cases and figures are intended to show the
results of these commercial operations and show how adopting the two introduced
innovations is supported both by qualitative analysis and quantitative one, as
well as how the need of adopting criteria of measurement of the physioeconomical
resistance through complex variables is sustainable and not without critical
foundations.

Figure
4: The effect of climatic instances on resistance for the export of lamb and
sheep goods toward Russia

In this
first case, obtained through gathering data from three companies working with
very similar products (two lamb and goat skin, one also with lamb fours), the
two observation produced an inverted result if using complex variables. The black
line represents the expected course for the season fall/winter 2013/1014, while
the red line represent the real course. The quantitative observation is based on
business data analyzed on complex variables and the qualitative on interviews
and questionnaires and should had drastically changed the strategy of the
exporting companies, if the analysis were executed in advance (using it like a
lightly predictive tool): probably those companies would not have set up the
whole strategy following the traditional Matrix. Actually, the Ayal & Zif’s
traditional curve was passively influenced by some unexpected physioeconomics
such as climate. Even though it was not hard to predict long and cold winter on
the Russian market, it did not happened, with a little snow and a warmer
average temperature, moreover no phenomenological analysis was pursued or
committed in advance. This kind of situation marked orders rather low from
buyers (in fact, they preferred to wait for the lowering of temperature causing
or pushing down to a “convex curve”, forcing companies to increase the
resources needed to resist and keep on the market, as can be seen in the
appendix detailed graph). Actually, the considered exporting companies faced
the need of higher promotional costs, travels, shows and -in the majority of
cases- started a deleterious and even wrong down-pricing strategy, even though certainly
of some necessity. This tactic was made necessary by the approaching of the
entry-point of “ready-to-wear” producers from China and Turkey (being some
economical issue, it is much easier to predict than paraeconomical ones). Those
companies can traditionally warrant similar-style products (like copies, event
though not fakes) at a much cheaper price. All of that caused a “curve of
physioeconomical resistance” or “convex” hardly predictable due to its
originality, but surely predictable if analyzed due to its potential, as proved
by some interviews[1]. If
such trend was previewed probably the company can draw a different planning,
with a different budget allocation and resulting in a different curve, that is
indeed a very anomaly: it is a “S” curve (resistance) much closer to a
“Bankruptcy” curve, despite its form, requiring something much different than a
mere concentration on the market, but a strong differentiation of markets,
because the weather forecasting can’t be influenced.

5.2
The Innovative Use Of Complex Value Variables on the Y Ax through the Physioeconomical
Effect of Social and Tribal Instances: Demonstration of an Alternative Strategy

In the same
market, through the same mix of companies it was experimented a second
physioeconomical instance in action, close to tribalism, which is the embargo
of the next year (2014) versus Russian federation and in the case of the
Ukraine’s crisis. If such crisis was called to block or heavily delay the consumption
index of most goods pointing on European imported ones (Bottelli, 2014), indeed
it gave an input to the demand of those products characterized by strong
awareness and recognition (mainly brand and Style), totemic vectors of a social
membershipof groups with highly
recognition Cova 2006; Hitmann & Ward 2007).

Figure 5: The effect of the
“Ukraine’s crisis” on the export of lamb and sheep leather garments and furs
toward Russia

This
emblematic case, observed and analyzed basing on companies data crossed with
some primary source[2],
proofs that the irrational predictability (Ariely, 2008) of behavioral action
under physioeconomical instances and under condition of uncertainness (Kahneman
& Tversky 1979; Tversky & Kahneman 1974) suggests to setup the axis’
values and consequentially to rethink the diversification or concentration
strategies. The much unexpected Ukraine’s crisis caused the embargo of
exportations of a wide range of goods toward the Russian Federation. Such block
heavily stroke companies like the tanneries and leather and fur clothes
producers considered. In this case, setting up the classic value “Volume of
Sales” on the “Y” it’d result in a strong resistance, caused mainly by the
impossibility to access the market and refurnish it, with the consequent need
of concentration. It is what happened to company 1 and 2 in the mix[3].
Anyway, rethinking the axis’s values, with complex variables and reading the
curve basing not on Volume but Value, the result and linked strategy resulted reversed[4].
It was initially done only by company 3 and with delay by company 4. In fact, now
the value of the very few products already stocked in the market was highly and
suddenly increased, when physioeconomical instances related to the tribal structure
of the society made them recognizable (Style, Brand). It is the good old
Offer-and-Demand stimulated by specific social conditions acting on micro
economic structure and altering consequentially the macroeconomic, like the
need of hetero recognition (Hitmann & Ward 2007). This course is predicted
to be maintained basically constant, but not able to bypass a certain level of
value (price) in relation to the volume simply due to three factors:

·Impossibility to reach the same peak-price of
competition with premium goods (marketing reason);

·The unavailability of goods due to expected enlargement
of the block (retail reason);

·The feared devaluation of the Ruble (29% in about six
month, monetary reason).

The
physioeconomical instance linked to tribalism could also drive the market
segment (price/recognition) to a scission: up pricing toward brand, Premium and
Superpremium goods and down pricing toward Chinese and Turk competitors’ goods,
unaffected by embargo. Such scission can barely touch both products and goods
under observation and analysis, since those are already present in the market and
should be out of stock before the end of block of exportations, making
themselves the origin of a turnover of a different origin, not based anymore on
the volume of sales but based on their financial value, linked to profit and
not turnover[5]. Some
among the most interesting aspects, is to observe the way how an advanced detection
and analysis of the hidden causes of resistance on the market may offer
alternate solutions, unconventional. If in the first case companies were been able
to predict the course of the previous year (it was known the case of a possible
warm winter, by weather forecasters), the strong resistance could have been
bypassed by diversification just in time. If, on the other hand, the resistance were been
observed but only the reason and the final observation of the next year
(resistance on the volume and non-resistance on the values because of
physioeconomics) anticipated, it could have been possible to notice the
“mechanical anomaly”. Such anomaly is the possibility of diversification despite
the high resistance of year 2013 thanks to the predictable nonresistance of the
2014 (note that this is acting not on Volume of sales, but on the complex
variable, value/volume).As a final add
on, it appears like necessary to identify a new entry market for the large
volumes non deliverable to the Russian Federation and a consequent need of
diversification operation, despite of the mechanical rules of the traditional Matrix
showing a strong.

5.3
Inversion of the Curves under Complex Variables Analysis: Demonstration

In the sixth
figure, 3rd example, the Matrix shows the anomaly of the course in
respect of the previsions of sales of shoes in Russian federation, with a much
needed correction of the analysis and interpretation of the Matrix itself and
consequent rethinking of the company’s export strategies.

Figure 6: The effect of social
tribal instances on the export of shoes toward Russian Federation

This figure
reports the double situation of a shoemaking company on the Russian market
owner of two similar brands, launched contextually in different segments and
with different strategies.

The operation
related to first brand (Red Label) was pursued and analyzed setting the “Y”
value to Volume of sales and due to a hard acceptance by the market of strong
volumes of product at a price that is rather high in comparison with the
preferred distribution channel, has resulted heavily hindered and requiring a
constant increasing need of resource, barely supported by results of sales and
consuming the margin of profit. This company faced the pressure of the market’s
resistance with a higher budget to keep on, spending for:

·Participation to fairs and
show for local market (useless to sustain profitability in foreign markets);

·Advertising and
communication campaigning for this market, that due the high cultural
contextualization of the market itself were useless abroad (but for spilling
over markets), increasing the use of resources (it resulted then being like a
physioeconomics key factor)

·Adaptation of the product
to a specific local taste of the middle class, with a strong cost effect
(again, in this case the resistance factor was physioeconomical), and this in a
critical moment for the company that was searching for a new market (RFA) to
supply the contraction of the orders in other traditional markets.

Instead,
the operation pursued for the second brand (marked in black, it is the Black Label
Brand) was set and analyzed in order to switch both variables on both axes, and
mainly focalizing on the value. In this case the strategies were revised
accordingly to result and it was realized that the curve resulted inverted,
despite the similarity of brands and volume’s results. The curve changed from
“S-resistance” to “C-concave” since the product was offered in much limited
volumes and were distributed following parameters not dissimilar from masstige
ones, so the price was pre-set to a high margin of profit and high prices. It
is interesting to note that a selected product with a higher price should meet
a stronger resistance than a lower priced one, instead, this company met the
opposite situation. Among the whole detected and analyzed data to understand
the complementarity but none competitively of the two operations, it is
remarkable that:

·Style: very similar, quiet aggressive, sensual, colorful,
with decorations (golden decoration and dark colors for the black label, sewed
and embroidered in shining colors for the red label)

·Price: aligned (even too much, making up a bit of confusion)

·Target: “Red Label” woman 35/45; “Black Label” woman
25/35

·Brand: naming and image aligned, coherent, similar

The whole
set of operations was supported by a specific style meeting the taste of
specific niches proving a high pro-capita profitability, so it was unnecessary
to increase to use of resources for the specific segment and market. The observations
leaded to the conclusion that strategy should not had been focalized on
concentration in one market due to the high resistance on large volumes, but on
the research of physioeconomics in act in order to obtain a concave curve
bringing profit and coverage, so let the company can differentiate on other markets.
This kind of interpretation must have been pursued together with a different
Y’s axis value inscription, more focalized on value better than volume and with
a different X’ axis value inscription, noticing when such needed resources will
be even needed in witch amount, as per a better management. Actually, as it is proofed
by the Black Label example, the resistance and the consequent higher resource
amount is localized much later and only after market has been penetrated with
success, unlike what was happening with the Red Label, where the resistances
started influencing the strategies much earlier, due to a misinterpretation of
the tactical actions, based on the attempt to get the same final score with large
quantities. It is remarkable the fact that the company expected a much higher
resistance on the Black Label due to the price[6].
Basing on a qualitative observation, it can be added that the strategy of both
Labels could have been oriented toward differentiation of markets, unlike the
traditional mechanic, and accordingly with the paper’s suggested innovation, due
to:

·Advanced search and
interpretation of the market’s physioeconomics (not limited to a merely strict
marketing analysis)

·Understanding of the
specificities of some of the environment influencing the target, better than
trying to fix “non influent” anthropological problems (distinction vs
wearability)

·Understanding of the right
target’s figurative language to set up right promotions in the right moment
(Thompson 2001) managing to move the flow cash to make a concave curve.

6.CONCLUSIONS, LIMITATIONS AND FUTURE IMPROVEMENTS

This paper
offers an innovative enhancement both qualitative and quantitative of the
classic Matrix of Ayal & Zif. In short, the technical findings and
innovation introduced can be shown as following:

·It has been found both
theoretically and practically one new mechanical complex curve (defined
“bankruptcy curve or convex”);

·Complex variables were set
up and proofed that they are useful to execute a deeper analysis;

·A new innovative and more
specifically quantitative use of the traditional matrix has been introduced and
proofed;

·Introduction of a new
mechanical, who supports now two new functional and linear equations, derivate
from the Matrix.

The
original hypothesis was:

·Need to make qualitative physioeconomical observations
of the resistance. The observed result is “how such observation, following an in-depth
analysis, hacks quantitatively onthe
measurement of the budgeted or needed resources in a certain stage of time”;

·Need to make the mechanic of the Matrix more
quantitative. The observed result is “how the utilization of qualitative and
quantitative data may influence the mechanics of the matrix, creating 1. Alternative curves 2. Alterate or Anomal
curves 3. One new curves”;

·Need to use complex and quantitatively useful
variables. The observed result is “the possibility to create mathematical
formulation of the result (linear functional equations), in addition to
detailed mechanical curves potentially predictive”.

Analyzing
the actual mechanical structure, the paper suggests to insert the innovative system
of complex variables on both axis to allow a better quantitative performance
and as a base for future improvements. Such variable are:

·Y = Val/Vol, the relation between Value of Sales and
Volume, splitting the analysis of result based only on Volume of Sales, since
there may be not any direct connection with profit, and focalizing on the
profit itself to reverse the result and the strategy, if needed;

·X = NR/t, the budgeted or used resources for an operation
in relation to time, so that it can be precisely evaluated when such resources
are needed acting on the operation and when they are necessary and if the
operation is finally auto financed by resources auto generated by the operation
itself.

Both
quantitative changing influences the mechanics of the matrix creating a new convex
curve (bankruptcy curve) and, potentially, an “S” curve reverted (that must be researched
in future improvements). To act quantitatively a bucket of data were used, data
taken form the real reports of real operations in real conditions. The second
statement has a qualitative aspect, it is the anticipated observation of the physioeconomics
acting on the resistance. Since some commercial form of resistance can be
predict and bypassed thanks to marketing, there are still a number of hidden
form of resistance linked to physioeconomics and unconventional that are often underestimated.
Those must be analyzed in depth being linked with several types of resistance
often connected with historical and environmental contingency. The qualitative
observation, applied to a matrix able to interpreter the data under a
quantitative spot of light, can lead to a final definition stating that:

1.The result of a Marketing operation is equal to the mutual function of time (t), seen like t = (R* x frmx LT), with ambiance or strategic environment (a), just like in the Ayal & Zif Matrix it is: ,

Where the
function of sales (result of a Marketing operation) resulting from it
is the mutual function of the needed
or budgeted resources in time (that determinates the resistance Res) with the relationship between Value and Volume obtained in the market (determining the economic result RisE), and expressible in extended way as

and in short:

Inevitably
the observation of the physioeconomics and paraeconomics acting as resistance
must be improved making it not merely qualitative and based of systems of
observation that are subjective, but based on real data useful for a
quantitative analysis, to be used also (and specifically) for a predictive
analysis. Finally, analyzing the curves resulting from the Matrix, the paper
proofs with evidence the possibility that the strategic matrix resulting could
be partially revisable considering both more associations of value’s variables
on “Y” and different resistance (from mere physioeconomics to more
comprehensive paraeconomics) and a need of resource recollected in the proper
stage of on “X”, through a direct link with a Gantt Chart. In the end, the strategies
mechanically resulting from the curves will change in a directly proportional
way with the utilization of more articulated values and variables on the axes,
so more strategic options may be explored. Since that paper proves that the new
variables put under discussion not the curves themselves but the mechanism to
linked result, it is indeed needed to understand in depth and experiment
quantitatively “to what extent the
strategies result mechanically linked to the curves also in case of use of
complex variables on the axes and the results may be measurable”. As further
limitations and possible improvements, it is notable that the analysis was pursued
systematically:

·only in a short range of time

·only in one market

·only in one business sector (light or textile
industry)

·on already happened events and the best predictive
experimentations were leaded on an operation-in-progress

Future
improvements should definitively work on improvement of quantitative analysis
of data and links with curves.

Foegel, RW 1994, “Economic Growth, Population Theory and
Physiology: The Bearings of Long-Term Processes on the Making of Economic
Policy”, in American Economic Review, Vol. 84, No. 3, Jun., 1994, pp.
369-395 Available from
The Article Stable URL: <http://www.jstor.org/stable/2118058> [6 June
2014]